Options For A Low Money Down Mortgage
Don’t qualify for a USDA or a VA loan? You still have a few ways you can buy a home without spending years saving for a down payment. Let’s learn more about low down payment loan options.
ONE+ By Rocket Mortgage
ONE+ by Rocket Mortgage is a programthat allows you to put 1% down while receiving a 2% grant from us. You can make a down payment of up to 3% and still receive the grant.
To qualify for this program, there are a few things you should know:
- Your income can be no higher than 80% of the median in the area you're looking to buy. Fannie Mae has a lookup tool.
- You need a qualifying credit score of 620 or higher.
- This may only be used to buy single-unit primary residences.
- Your initial down payment must be no higher than 5% after our 2% grant is added.
- The maximum loan amount is $350,000.
Other Conventional Loans
If you don't qualify for the above, there are other options available to you. This includes additional opportunities for a conventional loan.
Many people believe that if they want to get a conventional loan – any loan not insured by the federal government – they need a 20% down payment. This isn’t actually true, though. Depending on your lender, you may get a loan with as little as 3% down if you’re a first-time home buyer, who is someone who hasn’t owned real estate in the last 3 years. The confusion about the minimum down payment often comes from the PMIrequirement.
Your lender will usually require you to pay PMI as a condition of your loan if your down payment is less than 20% of the loan amount. PMI gives your lender protection if you quit making loan payments. Although you’re the one paying for it, PMI offers no benefits to you. As a result, most homeowners want to cancel PMI as soon as possible. You can contact your lender and request that they cancel your PMI plan as soon as you reach 20% equity in your home based on payments.
HomeReady® And Home Possible® Loans From Fannie Mae And Freddie Mac
You may also want to consider a HomeReady® mortgage from Fannie Mae or a Home Possible® loan from Freddie Mac if you have a low-to-moderate income compared to others in your area. Both loans allow you to buy a home with a 3% down payment and lower mortgage insurance options. Both loans also come with a loan level price adjustment (LLPA) credit of 1% of the loan amount up to $3,500. If the loan is below $200,000, the credit will be $2,000 as opposed to 1%. You can’t earn more than 80% of your area’s median income and still qualify. But unlike USDA loans, this stipulation only applies to the parties on the loan, not your entire household.
Freddie Mac BorrowSmart® AccessSM
Special-purpose credit programs are targeted to help those in underserved communities have equal access to lending and credit systems in the U.S. This opens up homeownership as an option for building generational wealth to demographics that may have particularly struggled accessing the financial system in the past.
Freddie Mac BorrowSmart Access is one such program, allowing those in one of 10 eligible metropolitan statistical areas to receive $3,000 in down payment assistance.2Here are the eligible areas:
- Atlanta-Sandy Springs-Alpharetta, Georgia
- Chicago-Naperville-Elgin, Illinois, Indiana, Wisconsin
- El Paso, Texas
- Houston-The Woodlands-Sugar Land, Texas
- McAllen-Edinburg-Mission, Texas
- Memphis, Tennessee, Mississippi, Arkansas
- Miami-Fort Lauderdale-Pompano Beach, Florida
- Philadelphia-Camden-Wilmington, Pennsylvania, New Jersey, Delaware, Maryland
- St. Louis, Missouri, Illinois
In order to qualify for this program, you need to have the following:
- At least 3% down (can include the assistance)
- Must purchase primary residence
- 620 qualifying FICO® Score
- Qualifying income from the loan can't be more than 140% of the area median where you're looking to buy
- At least one client must be a first-time home buyer
- You have to take a free homeownership education course. Ask your Home Loan Expert for details.
Purchase Plus
Purchase Plus is another SPCP.3Rocket Mortgage is offering Purchase Plus to those in eligible census tracts within one of 21 MSAs:
- Atlanta-Sandy Springs-Roswell, Georgia
- Baltimore-Columbia-Towson, Maryland
- Brownsville-Harlingen, Texas
- Chicago-Naperville-Elgin, Illinois, Indiana and Wisconsin
- Cleveland-Elyria, Ohio
- Dallas-Fort Worth-Arlington, Texas
- Detroit-Warren-Dearborn, Michigan
- Houston-The Woodlands-Sugar Land, Texas
- McAllen-Edinburg-Mission, Texas
- Memphis, Tennessee, Missouri and Arkansas
- Miami-Fort Lauderdale-Pompano Beach, Florida
- New York-Newark-Jersey City, New York, New Jersey and Pennsylvania
- Oklahoma City, Oklahoma
- Orlando-Kissimmee-Sanford, Florida
- Philadelphia-Camden-Wilmington, Pennsylvania, New Jersey, Delaware and Maryland
- Phoenix-Mesa-Chandler, Arizona
- Riverside-San Bernadino-Ontario, California
- San Antonio-New Braunfels, Texas
- St. Louis, Missouri and Illinois
- Tampa-St. Petersburg-Clearwater, Florida
- Washington-Arlington-Alexandria, Washington D.C., Virginia, Maryland and West Virginia
Those currently residing in eligible census tracts receive a base credit of $5,000. We’ll contribute an additional 1% of your loan amount up to $2,500, for a total of up to $7,500. To get the credit, you must reside in the census tract, but you can purchase anywhere across the country. Here are a few additional qualifications:
- At least one client must be a first-time home buyer.
- You must be purchasing a primary residence.
- You need to have a 3% down payment. The credit counts toward this total.
FHA Loans
FHA loans, which you can get with as little as 3.5% down, are backed by the Federal Housing Administration and are loans for people who have low to moderate income. FHA loans carry fewer requirements than USDA and VA loans. For these loans, you must plan to live in the property you’re buying as your primary residence, buy a home that meets livability standards and move in within 60 days of closing.
It’s important to keep in mind that you’ll likely need to make mortgage insurance payments until the loan is paid off if your down payment is under 10%. Some people get an FHA loan, wait until they build 20% equity in their property and then refinance to a conventional loan as a workaround. This eliminates the lifetime mortgage insurance requirement.
The Bottom Line
Government-backed USDA and VA loans can allow you to buy a home with $0 down. The fact that these loans are backed by the federal government allows lenders to be more lenient with down payment requirements. Both you and your home must meet USDA loan standards to qualify for a mortgage, and you must meet service requirements with a VA loan.
You may also be able to get a conventional loan with a low down payment. Freddie Mac’s Home Possible® or Fannie Mae’s HomeReady® program offers lower monthly payments toward your mortgage insurance and loans with 3% down. You can also get a government-backed FHA loan with 3.5% down, which can be a great option if you have bad credit.
Ready to take the next step toward buying a house? Apply for a mortgage today.
1 Client will be required to pay a 1% down payment, with the ability to pay a maximum of 3%, and Rocket Mortgage will cover an additional 2% of the client’s purchase price as a down payment, or $2,000. Maximum grant amount is $7,000. Offer valid on primary residence, conventional loan products only. Maximum loan amount of $350,000. Cost of mortgage insurance premium passed through to client effective January 2, 2024. Offer valid only for home buyers when qualifying income is less than or equal to 80% area median income based on county where property is located.Not available with any other discounts or promotions and cannot be retroactively applied to previously closed loans or loans that have a locked rate. This is not a commitment to lend. Rocket Mortgage reserves the right to cancel/modify this offer at any time. Additional restrictions/conditions may apply.
2Client will receive a $3,000 credit toward down payment. Offer valid only for first-time home buyers when qualifying income is less than or equal to 140% AMI and when the property is located in an eligible county within the following metropolitan statistical areas: Atlanta-Sandy Springs-Alpharetta, GA, Chicago-Naperville-Elgin, IL-IN-WI, Detroit-Warren-Dearborn, MI, El Paso, TX, Houston-The Woodlands-Sugar Land, TX, McAllen-Edinburg-Mission, TX, Memphis, TN-MS-AR, Miami-Fort Lauderdale-Pompano Beach, FL, Philadelphia-Camden-Wilmington, PA-NJ-DE-MD, St. Louis, MO-IL. Client is required to complete one-on-one Homebuyer Education Course with GreenPath facilitated by Homeownership Preservation Foundation (HPF). Offer valid on new loans locked on or after 2/28/2023. Offer valid on primary residence retail purchase loans only. Offer is not valid for team member or Schwab channel products. Offer is nontransferable and cannot be combined with any other discounts. Offer cannot be applied retroactively. Offer may not be redeemed for cash. Rocket Mortgage reserves the right to cancel this offer at any time. Acceptance of this offer constitutes the acceptance of these terms and conditions, which are subject to change at the sole discretion of Rocket Mortgage. Additional restrictions/conditions may apply. This is not a commitment to lend.
3Client will receive a closing cost grant up to the amount of $7,500 on their Closing Disclosure.Offer is valid for only for first-time home purchasers with primary residence properties in specific census trackslocated in Atlanta-Sandy Springs-Roswell, Georgia; Baltimore-Columbia-Towson, Maryland; Brownsville-Harlingen, Texas; Chicago-Naperville-Elgin, Illinois, Indiana and Wisconsin; Cleveland-Elyria, Ohio; Dallas-Fort Worth-Arlington, Texas; Detroit-Warren-Dearborn, Michigan; Houston-The Woodlands-Sugar Land, Texas; McAllen-Edinburg-Mission, Texas, Memphis, Tennessee, Missouri and Arkansas; Miami-Fort Lauderdale-Pompano Beach, Florida; New York-New York-Jersey City, New York, New Jersey and Pennsylvania; Oklahoma City, Oklahoma; Orlando-Kissimmee-Sanford, Florida; Philadelphia-Camden-Wilmington, Pennsylvania, New Jersey, Delaware and Maryland; Phoenix-Mesa-Chandler, Arizona; Riverside-San Bernardino-Ontario, California; San Antonio-New Braunfels, Texas; St. Louis, Missouri and Illinois; Tampa-St. Petersburg-Clearwater, Florida; and Washington-Arlington-Alexandria, Washington D.C., Virginia, Maryland and West Virginia. Offer valid from November 17, 2023. Offer is nontransferable. Offer cannot be applied retroactively to closed loans. Offer may not be redeemed for cash, and no change will be given if the discount amount exceeds costs otherwise due. Rocket Mortgage reserves the right to cancel this offer at any time.Other discounts may be ineligible with this offer.
